Virginia Beach Arena

Create a flexible, state-of-the art venue that:

• Serves as an iconic symbol for the City, Region, & State

• Offers events for everyone

• Draws major acts and top tier events

• Creates memories of a lifetime

• Creates jobs

• Catalyst to revitalizing the Oceanfront

• Year-round playground

• Major sports team potential The time is now. The place is Virginia Beach. 2

Our Vision

The time is now. The place is Virginia Beach.3

Arena Project Team

Local Experience and Global Expertise

The time is now. The place is Virginia Beach. 4

Operate – AEGSprint Center (Kansas City, MO

T-Mobile Arena (Las Vegas, NV)

Staples Center (Los Angeles, CA)

AEG Facilities manages and/or owns 120 of the industry’s preeminent venues

World’s 2nd largest promoter

Owns more professional sports franchises and events than any other company

The time is now. The place is Virginia Beach. 5

City Economic Impact

Construction Impact

New Jobs

2,300

New Spending

+

$240MSalaries

Materials/Services

The time is now. The place is Virginia Beach. 6

City Economic Impact

Annual Operations Impact

New Jobs

440

Net NewSpending

NewSalaries

$15M

+ 20-Year NPV

$1.7B$111M

RoomNights

78,500

• Fundamental business model and market analysis

• City incentives, payment cap, and term– Present Value of Incentives (CBRE): $115 M

• Privately financed and locally owned

• Highly qualified, experienced team

• Minority participation

The time is now. The place is Virginia Beach. 7

What Remains the Same

• Domestic lender option• Change in equity• Loan structure and amount

– Includes construction period interest which reduces risk during construction

– Includes 1 year Debt Service Reserve which reduces risk during operation and in the unlikely event of default

The time is now. The place is Virginia Beach. 8

What Changes

Main Benefits of Proposed Financing Change

• Domestic Alternative to Chinese LoanAddresses any perceived security concerns

Removes procurement requirement

Removes political volatility

• Accelerated Development/Opening2016 ground breaking/2018 grand openingWe haven't stopped!

• US Bank Trustee administrates Loan Proceeds

The time is now. The place is Virginia Beach.

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The time is now. The place is Virginia Beach. 10

City Resolution Adopted July 12, 2016Set the following conditions for Council’s “enthusiastic support” of USM’s pursuit of Bond Structure with approximately $230 M in bonds and $10 M in equity:

1. Maximum amount financed no more than actual price of construction contract, not to exceed $200M plus capitalized interest on a drawn-down basis, debt service reserves and issuance costs

2. Cannot finance previously incurred expenses or development fee3. Maximum Payment Cap and term cannot change4. A complete independent financial feasibility study5. Repayment of bonds solely from revenues of project and previously approved

incentives, and shall not be an obligation of City, VBDA, or Commonwealth 6. All protections and cure rights of the City to remain, and 7. An indicative rating letter from a major rating agency and the bonds are

anticipated to carry an investment grade rating from one of the 3 major agencies

USM has met all requirements but 1In lieu of a Bond Rating letter, we are contributing an additional $7.5 M in equity

Plan of Finance• Taxable Private Placement

– Known Finance Structure• Large Qualified Institutional Investors • Bond Proceeds will be limited to use for the Construction Contract,

Loan Costs, and required Reserves • No Developer Fees or reimbursement of costs other than prepaid

loan costs • USM fully responsible for the debt• Bonds repaid by same revenue streams as current Agreement

– 1% of Hotel Tax – “But For” Taxes – that if not for the arena, would not exist – Payments from Arena Operations

• VBDA serves Conduit Issuer– No obligation and no recourse to VBDA, City, or State– Same role it plays for other private entities, such as Westminster Canterbury

11The time is now. The place is Virginia Beach.

Proposed Change in Finance Structure

Bond Placement vs. Chinese Bank LoanLoan will fund $192,500,000 of

Construction ContractConstruction Contract over $200MEquity contribution of over $20 million

The time is now. The place is Virginia Beach. 12

City Protections• Tax incentives subject to appropriation• City has the right, but not the obligation, to

cure loan in the unlikely event of default• The City would negotiate new terms, if it

chooses to step in

Private vs. Public Financing• Doesn’t impact debt capacity of the City• Doesn’t impact the bond rating of the City• Monies don’t compete with fundamental services

– Teachers, schools, police, fire and rescue

The time is now. The place is Virginia Beach. 13

• AEG Corporate Review• CBRE Appraisal• CH Johnson Market/Financial Feasibility Study

– Nationally recognized and respected consulting firm– Extensive Study Process

• Site Visit• Stakeholder and Industry Expert Interviews• Comparable Facility and Market Analysis• Financial Projections

– Full Public Presentation available on USM website

The time is now. The place is Virginia Beach. 14

Financial Model Validated

National Comparable Facilities

Virginia Beach Arena Feasibility Study 15

Proposed Arena Sprint Center BOK Center Pinnacle Bank Arena

Smoothie King Center

Chesapeake Energy Arena Average

Location Virginia Beach, VA Kansas City, MO Tulsa, OK Lincoln, NE New Orleans, LA Oklahoma City, OKMarket Characteristics (MSA)

Population 2016 1,746,934 2,098,082 992,640 324,396 1,265,665 1,379,525 1,212,062Households 656,287 820,791 385,544 127,825 498,419 532,882 473,092Median Income $58,564 $57,817 $51,532 $53,333 $47,800 $52,650 $52,626Entertainment/ Recreation & Sports Spending (Fees & Admissions) $417,938,668 $524,342,544 $210,643,154 $72,539,491 $279,409,598 $304,485,900 $278,284,137

Total Business 62,049 81,386 39,996 13,797 57,205 54,827 49,442Median Age 36.3 37.4 37.4 34 37.8 35.7 36.5

Facility Characteristics (FY 2015) Year Opened 2017/2018 2007 2008 2013 1999 2002 2006 Most Recent Renovation - - - - 2014 2014 2014

Historic Cost (million) - $276 $196 $184 $110 $89 $171Funding Sources Public/Private Public/Private Public/Private Public Public Public -Anchor Tenant/s - - ECHL NCAA NBA NBA -Club seats 1,200 1,888 682 832 2,450 2,838 1,738Suites 30 72 45 36 56 48 51Loge Boxes 50 - 20 20 16 48 26Total Arena Seats 16,500-18,000 19,000 19,200 16,310 18,500 19,675 18,537

Sources: Esri BAO, AEG, SMG, RSVdatabase, team/facility's website, Johnson Consulting

Proposed Arena in Virginia Beach, VASummary of Comparable Facilities and Markets

Comparative Market Analysis - Summary

Virginia Beach Arena Feasibility Study 16

The time is now. The place is Virginia Beach. 16

The NumbersProposed MAXIMUM Bond $240 MLess: 1 Year Debt Service Reserve ( 16 M)

Net Debt Balance $ 224 M

Average Net Revenue and Incentives (CHJ) $19.5 MAdditional Surplus Reserve for Debt Service (1) 5.0 MAverage Annual Amount Available $24.5 M

(1) Total $21 M in reserves

Average Debt Service Coverage 1.5

Sensitivity Analysis 30%

• We have dreamed this dream with the community for over 3 years now

• Tremendous business, civic, and education support• Per CH Johnson, a venue of this size and scope would

meet a severely under-met need• Without a facility, we can’t get a team• If you don’t buy a ticket to an event or stay in a hotel,

you don’t pay for the arena• We need a final vote to move forward and make this

dream a realityThe time is now. The place is Virginia Beach. 18

We Ask for Your Support

The time is now. The place is Virginia Beach.

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Host Grand Opening!